Jay Francis Llave "Create and Protect Wealth"
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Languages Spoken: Specialties:
Insurance and Financial Advisor Small business owners and Professionals Financial Analysis process: (Send me a sample financial plan) Our recommendations, plans, and management are made only after a thorough discussion and evaluation of your goals and financial situation. The evaluation is divided into several specific areas:
We provide a systematic approach to crafting a customized plan for each client. History and Introduction: Jay began his career pricing, packaging and the evaluation of asset-backed fixed-income securities in 2004 for banks in North America, Germany, Switzerland, and Japan. Jay had the foresight to rebalance his and his clients’ assets in January of 2007. A whole 7 months prior to the beginning of the latest significant correction. With 2 beautiful children, Jay has focused his efforts to enabling and insurance/financial advising entrepreneurs, their families, and their advisors. Jay is an Advocis (The Financial Advisors Association of Canada) member and is licensed by FSCO (The Financial Services Commission of Ontario). |
Jay Llave
Insurance/Financial Advisor
Benchmark
In 2008, at age 65, the income for the lowest tax rate and highest government credits is $31,524.
Two before-tax incomes of $65,000 or less equals to $8,345 per month after tax income. This is the equivalent of two pre-retirement incomes of approximately $70,000 or one individual income of $153,000 while only earning $63,048.
The tax system, when used most efficiently, can make a substantial contribution to increasing your after-tax income. As of the 2007 tax year, retired couples have the ability to split eligible pension income equally (Tax guide line 314). Splitting income can be extremely beneficial because, in Canada we live in an increasing marginal rate of tax world. When your income crosses particular thresholds, every dollar you earn above that threshold is taxed at a higher rate. It is therefore important to split your incomes equally, as much as possible, to have two lower incomes rather than one large and one small income.
The Canadian tax system provides an age credit to those over age 65 earning less than $31,524 per year (in 2008). This credit will reduce your taxes. The credit can be as much as $5,276 (in 2008, indexed with inflation) per year, per spouse. Therefore, if you can have two incomes of $31,524 each you will pay the least amount of taxes and gain the highest level of credits. In Ontario in 2008 the age credit would contribute to providing a total after-tax monthly income of $4,662.32 (for the couple). Once you reach the $31,524 threshold this amount begins to be "reduced" at a rate of 15% per year.
To put this into context, $4,662.32 per month after-tax is the equivalent of one person earning an annual employment income of $73,500 (before tax). In this case the total tax paid would be $17,363.66. In the example of the 65 year old retired couple with the same after-tax income, their combined gross before tax income is only $63,048 (vs. $73,500) and the tax paid is only $7,100 (vs. $17,363.66). Income splitting and the tax credits have resulted in a $10,000 annual decrease in tax paid!
It is important to also keep in mind the Old Age Security clawback zone. Once you begin to earn an income of $64,718 (in 2008) or more your Old Age Security income begins to be taxed back at a rate of 15% per year. Old Age Security, for those age 65 and older, is approximately $500 per month per spouse. Over a 20 year period of time, $500 per month per spouse is the equivalent of $240,000 of income paid to you from the Federal Government during retirement. The Federal Government is in effect giving you an additional $240,000 to live on. This is virtually doubling the size of your investment portfolio.
If you maximized the income between you and your spouse so that each of you were just under the clawback zone (and were age 65 or older), in Ontario your total monthly after-tax income would be approximately $8,342.62. Is this enough on which to live?
Why is this information important?
Understanding the tax system is extremely important because it helps to answer the question: "If I need more money than the basic guaranteed amounts noted above, which source of income do I draw from first?" By understanding the tax system you can strategically draw the right amount of income from the right source at the right time. By doing so you can maximize the dollars received from the different levels of government while also maximizing your after-tax income.
Here are the questions:
- What do you need to do to keep your lifestyle and/or taxable income received below $65,000 (each)?
- Do you need to adjust your expenses?
- Do you need to reduce your RRIF income or RRSP savings?
- Do you need to add more money to other "tax efficient" investments?
The likely answer is "all of the above"; brainstorm with your trusted financial advisor.
This number will be used to create the guaranteed income for life, financial independence, managed by a trusted financial advisor and their team of professional partnerships.
To create a guaranteed lifetime income you turn all of your assets to a lifetime pension plan structure called an annuity. If you annuitize all of your investments at the time you retire you will have a guaranteed income, for you and your spouse for life, regardless of how long you live.
To create a guaranteed benefit for your children as well, you should set up a joint last survivor life insurance plan. The proceeds of this insurance plan would be paid to your children upon the death of the last surviving spouse. The additional income from the annuity will go towards financing the cost of the last survivor insurance.
This benchmark is important to measure all retirement income decisions against. Any other option will require more risk always measure the gain against the degree of additional risk. Is it worth to take on additional risks?
Tax Milestones
| Birth | Open savings account to invest Universal Child Care Benefit. Resulting earnings are taxed in the hands of the child. Open a non-registered account for transfers of capital. |
| Under 7 | Increased child care expense deductions and Child Tax Benefits. Invest in Registered Education Savings Plans and earn Canada Education Savings Grants and Learning Bonds. File tax returns if the child has earned income to build up RRSP contribution room. A "kiddie tax" may apply to certain earnings from private corporations. The child is a dependant for the purpose of Canada Pension Plan disability and survivor benefits. The child is a dependant child for the purposes of the Child Amount. |
| Age 15 | Last year for eligibility for the Canada Fitness Tax Credit and child care expense claims (unless disabled). May qualify for education amount only if courses are taken at a post-secondary level. |
| Age 17 | File a tax return to claim the refundable GST Credit and create room to make contributions to a TFSA-Tax-Free Savings Account. |
| Age 18 | Eligibility to contribute to the Canada Pension Plan. Eligibility to open a TFSA. Contributions to a Registered Disability Savings Plan are based on beneficiary's income. Transfer tuition, education and textbook credits to parents, grandparents or spouse. A $2000 over contribution to an RRSP is allowed. |
| Age 21 | Income earned on deposits of personal injury awards become taxable. |
| Age 31 | Age eligibility for contribution to an RESP ends. |
| Age 35 | Age eligibility for contribution to an RESP ends for a disabled beneficiary. |
| Age 49 | Registered Disability Savings Grant and Bond eligibility ends. |
| Age 18 to 55 | Earning and investing years: file a tax return every year. Invest in a TFSA every year. Make RRSP contributions every year. Open non-registered accounts for other surplus savings. Buy a tax exempt principal residence. Manage debt and interest costs. Grow your personal net worth. |
| Age 55 | Eligibility for a phased in retirement: take company pension early. |
| Age 59 | Eligibility for contribution to a Registered Disability Savings Plan ends. |
| Age 60 | Eligibility for early withdrawal of Canada Pension Plan Benefits. |
| Age 65 | Old Age Security benefits begin; eligibility for Age Amount. Canada Pension Plan Benefits. In home caregiver amounts may be claimable. Conversion of RPP's and RRSP's to pension benefits. |
| Age 70 | Last year for contributing to the Canada Pension Plan. |
| Age 71 | Conversion of RRSP to.RRIF or annuity; maturation of deferred profit sharing plans. |
| Age 90 to 100 | Maximum RRIF payout age, terms of several types of annuities end. |
Documents
1. Ailing parents 7. Leaving a job
2. Death of a loved one 8. Marriage
3. Disability 9. Parenthood
4. Divorce 10. Retiring
5. Empty Nest 11. Selling or Transferring a Small Business
6. Home Ownership
Ailing Parent
- Investor Content
- Financial Checklist
- Importance of a Will
- Health Issues
- Home Care
- Funding Care
- Institutional Care
- Tax Issues
- Charitable Donations
Death of a Loved One
- Investor Content
Disability
- Investor Content
Divorce
- Investor Content
Empty Nest
- Investor Content
Home Ownership
Leaving a Job
Marriage
- Investor Content
- Advisor Education
Parenthood
- Investor Content
- Financial Checklist
- Important Paperwork at Birth
- Budgeting for Baby
- College and University Funding
- Choosing a Doctor
- Estate Planning, Life Insurance and Tax Changes
- Going on Leave and Going Back to Work
Retiring
- Investor Content
- Financial Checklist
- Planning Lifestyle Choices
- Budgeting
- Sources of Income in Retirement
- Importance of Financial Advice
- Health Issues
- Estate and Tax Planning
- Charitable Donations
Selling or Transferring a Small Business
- Investor Content
Weekly Meetings
Week 17
A brief review of TFSA Planning Rules:
- What is a TFSA?
Available January 1, 2009, the new Tax-Free Savings Account (TFSA) is a registered account in which investment earning, including capital gains accumulate tax free. Contributions up to an annual maximum of $5000 can be made by/for those who have attained 18 years of age and are residents of Canada. There is no maximum age limit. This amount will be indexed after 2009, with rounding to the nearest $500. - Can unused contribution room be carried forward to future years?
Unused contribution room can be carried forward on an indefinite carry forward basis. You can take money out, in other words, spend it on whatever you want, and then put it back in when you can because the TFSA contribution room has been preserved. - What happens when I make an overcontribution?
Taxpayers cannot contribute more than their available TFSA contribution room in a given year, even if they make withdrawals from the account during the year. If they do, a penalty tax of 1% of the highest excess amount in the month, for each month you are in an overcontribution position is charged. Discrepancies in contribution room limit or excess contributions, must be reported to the TFSA issuer.
In addition, after October 16, any income earned resulting from an overcontribution, or a contribution to a prohibited or non-qualifying investment will be taxed at 100%. - What income sources should be earned from the TFSA account?
That largely depends on age and sources of other income. Those sources of income subject to the marginal highest tax rates (such as interest) or dividends, which artificially inflate net income, thereby decreasing social benefits payments, should perhaps be earned within a TFSA. But if you are looking for real growth, the TFSA should contain a diversified set of investments, including equities.
Note that losses from investments earned within a TFSA are not deductible from capital gains held outside the account. - What are eligible investments for a TFSA?
The same eligible investments as allowed within an RRSP apply to the TFSA. A special rule will prohibit a TFSA from making an investment in any entity with which the account holder does not deal at arm's length.
Unlike the RRSP, contributions to a TSFA do not result in an income tax deduction and withdrawals from a TFSA are not reported as income nor included in income for any income-tested benefits, such as the Canada Child Tax Benefit or Goods and Services Tax Credit. - Do the Attribution Rules affect investments within the TFSA?
There is no attribution rule attached to the new TFSA, allowing adults, including parents and grandparents to transfer $5000 per year to each adult child in the family—for the rest of their lives. In addition, one spouse may transfer property to the TFSA of the other spouse without incurring attribution. - Can the TFSA be used for retirement planning?
Yes. A 40 year old taxpayer who invests $5,000 each year for 25 years in a TFSA (total capital of $125,000) at a 3% rate of return, would accumulate $185,000 in the account, an increase of $60,000 or 48%. This would be approximately $15,000 more than if the same investment was made outside the TFSA in a taxable account."
Week 18
Cessation Of A Business and Tax Consequences
"There are corporate tax implications when a business is terminated and a corporation ceases to exist. Generally, a corporation ceases to exist on:
- a winding up of the corporation pursuant to provisions outlined in subsections 88(1) or 88(2) of the Act;
- amalgamation with another corporation under subsection 87(1) of the Act; and
- Dissolution of its charter by filing Articles of Dissolution in the jurisdiction in which the corporation was incorporated.
There are differing tax consequences which will result to the corporation and its shareholders, depending on the manner in which the corporation is terminated.
For instance, there are generally tax deferral provisions available to a wholly owned subsidiary that is wound-up into its parent, pursuant to subsection 88(1) of the Act. Similarly tax deferrals are accorded for a statutory amalgamation under Subsection 87(1).
However, a winding-up under subsection 88(2) and distribution of the corporation's assets to its shareholders will generally result in the realization of the corporation's assets at fair market value (S. 88(2)(a)(iv)) and the taxation of such distribution to its shareholders as a dividend at fair market value.
Filing Implications - Business Cessation
On the Federal T2 return, if any of lines 072 (wind-up of subsidiary), 076 (amalgamation) and 078 (dissolution) apply, it is the corporation's final taxation year.
Example: Tax Planning
Consider and quantify the corporate tax impact of effecting a dissolution or termination of the corporation. Will there be corporate tax payable on resulting capital gains and recaptured capital cost allowance or the realization of reserves and deferred amounts?
Consider the utilization of losses to the successor corporation and the fact that an additional taxation year will occur on an amalgamation with another corporation.
Record Retention- The records of the dissolved corporation must also be kept for two years after the day the corporation is dissolved [Reg. 5800(1)(b)].
Clearance Certificates
The responsible representative of the corporation must obtain a clearance certificate from CRA pursuant to S. 159(2) before distributing any of the corporate property to avoid possible liability for the corporation's tax obligations. See Information Circular 82-6, Clearance Certificate, for more details.
Inactive Corporations
If the articles of the corporation are still legally in force, despite the corporation being inactive, the corporation must file a tax return.
Shareholder Implications
Evaluate that tax implications to the shareholders. If the shareholders are individuals they may be subject to tax on deemed dividend treatment on the wind-up of a corporation. If the shareholders are corporations consider the potential implications of Section 55 of the Act.
Provincial Laws
While each province has legislation for its own corporate tax laws, the federal government administers returns and collects taxes for most provinces and territories. However, Quebec, and Alberta administer their own corporate tax returns. To learn how this topic pertains to corporate taxation at the provincial level, refer to the applicable provincial legislation, guides and information circulars.
In Alberta, if it is the last return for the corporation, the reason for the final return must be listed (i.e. amalgamation, discontinuance of permanent establishment, bankruptcy, wind-up into parent, and dissolution of corporation). Quebec asks if the corporation has ceased activities at line 29 of Form CO17 and corporations in Ontario must obtain a Letter of Consent from the MCBS to voluntarily dissolve."
Resources
Budgets
- Accessible Parking Permit Return Letter
- CMA Do Not Contact Service Letter
- Credit Bureau Letter Equifax
- Credit Bureau Letter TransUnion
- Department of Vital Statistics Letter
- Elections Canada Letter
- Income Tax Form Request
- Ministry of Transportation Letter
- Passport Return Letter
- Provincial Health Care Letter
- SIN Card Cancellation Letter
Services
Financial Services
1. Funding For:
- Capital Gains Tax Liabilities
- Survivorship Agreements
- Shareholder/Partnership Buyout
- Business Succession
2. Wealth Accumulation
3. Retirement Planning
4. Estate Planning
5. Personal Insurance Planning
Products
1. Life Insurance
2. Critical Illness Insurance
3. Disability Insurance
4. Long Term Care
5. RRSP/RRIF/LIF/Annuities
6. Investment Funds
7. RESP
8. Alternative Investment Products
9. Private Equity and Venture Capital
10. Guaranteed Minimum Withdrawal Benefit
11. Segregated Funds
Employee Benefit Plans
- Life and Health
- Pension/DPSP
- Group RRSP